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Complaint for violations of Title 18, United States Code, Sections 1343 and 1344(1)
Beginning in.or around Orange County and 10000 Santa Monica Boulevard, Unit 2205,
January 2014 and continuing Los Angeles County Los Angeles, California 90067
through in or around March
2019
COMPLAINANT'S STATEMENT OF FACTS CONSTINTING THE OFFENSE OR VIOLATION:
(See attached Co laint's Statement of Facts Constituting the Offense or Violation which is incorporated as part
of this Comg~int~',i
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COUNT ONE
matters.
Bank & Trust bank account in the name of Eagan Avenatti LLP in
Irvine, California.
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COUNT TWO
Angeles, California.
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follows:
I. INTRODUCTION
violations of Title 18, Title 21, Title 26, and Title 31 of the
1
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2
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Peoples Bank with false federal personal income tax returns for
the 2011, 2012, and 2013 tax years. In these purported tax
for the 2011, 2012, and 2013 tax years, and did not make any
3
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estimated tax payments to the IRS during the 2012 and 2013 tax
interest and penalties, from the 2009 and 2010 tax years.
with a 2012 federal tax return for EA LLP which claimed total
actually filed with the IRS in October 2014 claimed total income
AVENATTI used the entire $1.6 million for his own purposes,
to his client and claimed that the settlement payment was not
due until March 2018. When the fake March 2018 deadline passed,
AVENATTI led his client to believe that the $1.6 million payment
4
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information:
5
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G.B.'s counsel, I know that on or about June 29, 2018, G.B. sent
During his interview, G.B. said that sometime after he sent this
counsel also confirmed that AVENATTI still has not turned over
D
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7
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obstructive conduct.
government's investigation.
GBUS was evicted from its corporate offices and AVENATTI refused
has been able to obtain some GBUS records, including the data
V. CONCLUSION
of 18 U.S.C. ~ 1343.
EXHIBIT 1
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ao ~ . ~a~~p~~~~~►T~~~EALED* Document 4-1 *SEALED* Filed 02/22/19 Page 1of
See Attachment A
located in the Central District of California, there is now concealed (idennfy the person or describe the property to be seized):
See Attachment B
The basis for the search under Fed. R. Crim. P. 41(c) is (check one or mope):
~ evidence of a crime;
~ contraband, fruits of crime, or other items illegally possessed;
~ property designed for use, intended for use, or used in committing a crime;
❑ a person to be arrested or a person who is unlawfully restrained.
///
///
///
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/s/
Applicant's signature
DOUGLAS F. McCORMICK
Date: February 22,2019
Judge's signature
City and state: Santa Ana, CA United States Magistrate Jud ~e Douglas F. McCormick
Printed name and title
ATTACFIMENT A
PROPERTY TO BE SEARCHED
ATTACFIMENT B
I. ITEMS TO BE SEIZED
"Subject Entities").
i
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Entities.
ii
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or GB LLC.
AVENATTI.
iii
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iv
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and/or AVENATTI.
merchant accounts.
v
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information.
items to be seized:
the device at the time the things described in this warrant were
vi
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device;
search terms that the user entered into any Internet search
vii
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herein. The Search Team will review only data from the SUBJECT
viii
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but not more than 180 days from the date of execution of the
PPLC; and (e) Brager Tax Law Group. Such "privilege key words"
ix
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below.
may be given to the Search Team. If, after further review, the
use "scope key words" to search any documents or data that were
xi
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request, the Search Team may provide the Privilege Review Team
detailed quality check on any data that did not contain the
"scope key words" to ensure that the scope key word search is
"privilege key words" and any of "scope key words" shall be then
Documents and data that are identified by the "scope key word"
xii
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authorization.
maintenance.
xiii
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13. The Search Team will search only the documents and
data that the Privilege Review Team provides to the Search Team
that are within the scope of the search warrant. The Search
Team does not have to wait until the entire privilege review is
concluded to begin its review for documents and data within the
scope of the search warrant. The Privilege Review Team may also
conduct the search for documents and data within the scope of
may, in its discretion, use key word searches and other searches
xiv
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law firms and lawyers not previously identified, the Search Team
Privilege Review Team. The Search Team shall not further review
searched; and
xv
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Relativity, and Eclipse, which tools may use hashing and other
sophisticated techniques.
the Court and shall make and retain notes detailing how the
of a crime.
government may make and retain copies of such data, and may
obtained by the Search Team, but may not access data falling
xvi
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of the Court.
court order.
xvii
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AFFIDAVIT
TABLE OF CONTENTS
I. INTRODUCTION..........................................1
B. Background Information..........................15
VIII. CONCLUSION.....................................158
ii
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AFFIDAVIT
follows:
2. INTRODUCTION
violations of Title 18, Title 21, Title 26, and Title 31 of the
2
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[C3
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percent of EA LLP.
Tully's.
trust fund taxes, which had been withheld from GBUS employees'
payroll and trust fund taxes that GBUS owed to the IRS. Indeed,
the IRS.
taxes between the fourth quarter of 2015 and the fourth quarter
and GB LLC's bank account records shows that between 2015 and
and should have been used to pay GBUS payroll tax obligations.
5
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responsible for filing GBUS's payroll tax returns and making the
C
^•
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bank account under the name of GB LLC, which AVENATTI had opened
IRS levies.
7
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sale for the kiosks and equipment, and instructed Boeing to wire
with EA LLP rather than any of the bank accounts associated with
GBUS. Had the Boeing contract and subsequent bills of sale been
under the name GBUS, Boeing would not have made the $155,010
payment due to the existing GBUS tax lien. After receiving the
bank accounts.
trust fund taxes that had been withheld from EA LLP employees'
the required tax payments even though the payroll company had
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filed partnership tax returns (IRS Form 1065) for the 2013,
2014, 2015, 2016, and 2017 tax years, even though EA LLP appears
Similarly, A&A has not filed corporate tax returns (IRS Form
11205) for the 2011, 2012, 2013, 2014, 2015, 2016, or 2017 tax
EA LLP.
returns for the 2009 and 2010 tax years indicating that he owed
penalties. AVENATTI, however, did not pay the IRS the amounts
personal tax returns for the 2011 through 2017 tax years.
and lived lavishly, yet largely failed to pay any federal income
that he earned $3.7 million dollars in 2016. His wife also said
provided The Peoples Bank with false federal personal income tax
returns for the 2011, 2012, and 2013 tax years. In these
personal income tax returns for the 2011, 2012, and 2013 tax
years, and did not make any estimated tax payments during the
2012 and 2013 tax years. In fact, as noted above, at the time,
10
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provided The Peoples Bank with a 2012 federal tax return for EA
loss of $2,128,849.
the entire $1.6 million for his own purposes, including to pay
claimed that the settlement payment was not due until March
2018. When the fake March 2018 deadline passed, AVENATTI led
his client to believe that the $1.6 million payment had never
11
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discussions with other IRS-CI SAs and IRS revenue agents, I have
(2) Social Security tax; (3) Medicare tax; and (4) federal
12
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solely on employers.
taxes and income taxes from the wages paid to their employees,
and to pay over the withheld amounts to the United States. The
exists even if the taxes are not actually withheld from the
employees' wages. The employee FICA taxes and income taxes that
United States."
employees.
13
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discussions with other IRS-CI SAs and IRS revenue agents, I have
as corporations.
discussions with other IRS-CI SAs and IRS revenue agents, I have
for individuals:
for the taxable year gross income which equals or exceeds the
14
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separately for the 2011 to 2017 tax years ranged from $3,700 to
$4,050.3
income.
B. Background Information
District of California.
O'Malley left the partnership and the firm changed its name to
15
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16
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following:
17
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bookkeeper.
with IRS revenue officers and IRS revenue agents, I have learned
period, GBUS also filed its IRS Forms 941 each quarter.
filing its IRS Forms 941 and paying its federal tax deposits to
the IRS.
tax returns for the fourth quarter of 2015 through the third
quarter of 2016.
collection case, GBUS filed IRS Forms 941 for the fourth quarter
of 2015 through the second quarter of 2017, and an IRS Form 940
for 2016.
Period Payroll Tax Trust Fund Payments Payroll Tax Trust Etuzd
Assessed Tax Assessed Owed Tax Owed
19
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Period Payroll Tax Trust Etiind Payments Payroll Tax Trust Ftuui
Assessed Tax Assessed Owed Tax Owed
tax returns.
20
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Forms 941 and pay its payroll taxes. I have reviewed the
following information:
payments.
V.S. RO 1 told M.E. and V.S. that the purpose of his visit was
21
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payroll information from M.E. and V.S., but they did not want to
information.
and payroll taxes. AVENATTI did not tell RO 1 the name of the
September 2015 GBUS had not filed any payroll tax returns or
very confused about this as well, and that he would talk to his
22
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told AVENATTI that GBUS owed a balance of $7,758 for the 2015
2016.
the time. M.H. said she had just been hired, and would need to
told M.H. that by November 14, 2016, GBUS needed to pay the
profit and loss statement, and a fully completed IRS Form 433B
23
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AVENATTI was not the responsible party for GBUS's payroll tax
liabilities.
out of the country for work and M.H. had not been able to have a
business or its taxes. M.H. said that AVENATTI was coming home
for the holidays and that she planned to meet with him
not heard back from GBUS, M.H., or AVENATTI. The IRS had not
and IRS Form 941 returns; and IRS Letter 1085, detailing the
proposed assessment and advising GBUS that the IRS had prepared
24
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on the IRS Form 6020B substitute returns, GBUS owed the IRS a
$7,758 balance due for the 2015 third quarter federal tax
deposits.
6020B substitute returns with the IRS for the fourth quarter of
that liens would be filed for all balances due from the IRS Form
GBUS and M.H., which stated that GBUS had until April 10, 2017,
financial information and IRS Form 433B. GBUS did not comply
liens against GBUS for all amounts due to the IRS. On June 26,
2017, the IRS filed a federal tax lien against GBUS for
25
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(2) California Bank & Trust (~~CB&T"); (3) JP Morgan Chase Bank
Bank of Omaha (~~FNB Omaha"); and (8) Boeing. The levy notices
levies only apply to funds in the accounts at the time the levy
notices.
~^.
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information had been provided, and his calls had not been
who confirmed that AVENATTI was the sole person responsible for
GBUS's finances and served as both the CEO and Chief Financial
the IRS sent to GBUS had been received by GBUS, and that the
When asked for AVENATTI's email address, S.F. said she could not
give that out. S.F. did not appear surprised that RO 1 was
visiting GBUS. S.F. said she was aware of the IRS levies. RO 1
also provided S.F. with a copy of IRS Letter 903, which stated
its required trust fund payments to the IRS. RO 1 also read the
S.F. confirmed that she told AVENATTI about RO 1's visit and
27
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justification for the potential fraud referral was that GBUS had
the taxes owed for one year and had only received one payment of
Brager said we would serve as the new POA for GBUS. Brager told
error and that GBUS had gone through staffing changes in the
about the IRS issues until the delivery of the 903 Letter `last
that the case was a year old, he had been unable to get any
information from the prior POA, M.H., and that liens and levies
had already been issued. Brager told RO 1 that the left hand
did not know what the right hand was doing, that AVENATTI was
busy, and that employees were not doing their jobs. RO 1 told
to the IRS. RO 1 asked S.F. why she changed her mind and wanted
to talk to him. S.F. said that after hearing RO 1 read the 903
called Brager's office, but was unable to reach him. During the
The Form 9297 letter also advised GBUS that the IRS would seize
A.H. confirmed that she had been a payroll clerk and bookkeeper
conduct an IRS Form 4180 trust fund interview with T.M., GBUS's
29
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was the sole corporate officer for GBUS and was responsible for
also argued that T.M. was not personally liable for any of
deposits had been received from GBUS and that GBUS was an
Brager said that GBUS would not be able to make any federal tax
had not made any federal tax deposits since the fourth-quarter
of 2015, that the levies did not start until August 2017, and
30
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that had been withheld from the employees from October 2015 to
July 2017, Brager told RO 1 that he did not know and that he
told him that GBUS had made a federal tax deposit payment for
its payroll taxes. Brager also said that GBUS had filed its
tax returns from GBUS for processing and four payroll tax
however, the IRS still had not received any federal tax deposits
ICS History that the case was being considered for a fraud
referral to IRS-CI.
31
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financial arrangements.
GBUS. RO 1, however, told Brager that GBUS did not qualify for
have had the money at issue readily available since the federal
tax deposits were never made. Brager said he didn't know the
the latest levies issued to FNB Omaha. The FNB Omaha employee
32
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said that GBUS might still be using TSYS as its credit card
that: (1) the merchant account IDs had been changed in all of
account into which cash from the Tully's stores was deposited
under the name of GB Auto; (4) cash was being deposited into a
BofA account ending in 7412 (~~GB Auto BofA Account 7412"); and
(5) cash was retrieved from the coffee shops twice a week on
government.
GBUS.12 M.G. said she was responsible for daily cash deposits
closed due to non-payment of the lease. M.G. said that she had
33
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occurring. M.G. said she had all the financial information and
accounts again.
M.G. and V.S. were served with IRS summonses requiring them to
During the interview, M.E. filled out a Form 4180. M.E. said
LLC, and GB Auto. M.G. confirmed that GBUS had changed both its
34
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into an account for GB Auto. M.G. said that the entity name for
M.G. said that REGNIER, from EA LLP, had set up the new bank
refers to himself as the owner, CEO, and sole member of GBUS and
that any and all decisions go through him. V.S. said that funds
team. V.S. said that T.M., GBUS's former C00/CFO, and B.H.,
35
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deposits until further notice. M.G. said AVENATTI was also very
documents submitted.
counsel .ls
email exchange with AVENATTI. A.G. stated that the contract was
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S.F. They told him AVENATTI had instructed the Tully's stores
credit card account with Chase Bank under the name of GB LLC.
because AVENATTI had not been properly served with the summons.
AVENATTI "did not act willfully since he was not involved in the
have knowledge of the fact that the taxes were unpaid until
37
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held personally liable for the trust fund taxes owed by Global
Baristas, US LLC."
then contacted a GBUS employee, who told him that the closures
and that the company would hold the privilege -- meaning that
any legal discussions they may have had with AVENATTI in his
2013.
position as GBUS's COO and CFO. T.M worked for GBUS until
January 2015 and September 2015, T.M. worked for GBUS only half-
39
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make decisions for GBUS. T.M. said that AVENATTI was the
all of the hiring decisions for GBUS, and interviewed and vetted
the candidates.
acted as a lawyer for GBUS, T.M. said he did not know and that
this was a gray area. T.M., however, said that he did not see
any invoices from EA LLP and was not aware of GBUS ever hiring
legal matters.
saw invoices from Foster Pepper to GBUS, which were then routed
to AVENATTI.
company, but was not sure of the company's name. The prior
.~
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was rolled back. T.M. discussed rolling back direct deposit and
the payroll company would pull the funds for payroll and payroll
that the payroll funds would still be in GBUS's bank account and
GBUS had more time to make funds available to pay the employees
about his personal liability. Payroll was very tight and GBUS
41
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that week. T.M. told AVENATTI that GBUS needed funds to pay its
payroll taxes the next day. AVENATTI told T.M. not to count on
for GBUS. GBUS's IRS Forms 940 and IRS Forms 941 were normally
money from GBUS. T.M. said that money was flowing out of GBUS
42
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and from EA LLP to GBUS. T.M. said that none of the transfers
gone. M.B., GBUS's controller at the time, would tell T.M. when
AVENATTI had taken money out of the GBUS bank accounts. When
foresee that happening. AVENATTI did not tell T.M. what the
funds AVENATTI was taking out of GBUS's bank accounts were being
vendors.
Tully's stores went through GBUS. All cash receipts came from
GBUS and everything happened under GBUS. T.M. did not recall
43
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9[ 39.d).
did not recall seeing any loan documents, and there was no debit
financial statements.
Auto was AVENATTI's racing team in IMSA. Money that was sent
IMSA. AVENATTI used the Tully's logo on his race car and an
that the IMSA expenses did not help with GBUS's operations.
for GBUS had been completed or filed. T.M. had arranged for
..
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understood that REGNIER had been with AVENATTI for a very long
time.
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with AVENATTI and does not know if AVENATTI ever sold GBUS.
information:
would email T.M. and AVENATTI to ask what bills to pay. M.B.
and preparing and filing the payroll tax returns. M.B. believed
.,
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and told Ceridian that GBUS would pay the payroll taxes itself.
This gave GBUS float time for the payroll payments. M.B.
account and that no one other than AVENATTI was empowered to pay
the payroll tax returns, and AVENATTI was responsible for paying
and then from T.M. to M.D. M.B. believes that AVENATTI would
net salary to GBUS employees, Ceridian prepared the IRS Form 941
payroll tax return, and GBUS was responsible for paying the
said that AVENATTI directed M.D. not to pay GBUS's payroll taxes
respond to her email. When M.B. asked AVENATTI over the phone
47
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~~mine to deal with." M.B. did not believe she saved a copy of
AVENATTI.
department knew that GBUS's payroll taxes were not being paid
human resources department also knew that the payroll taxes were
because the corporate office was small, and the employees were
few months later in December 2015, and actually took a pay cut
point north."
money at the time and M.B. did not think the IMSA sponsorship
was the best use of funds. Without the IMSA expenses GBUS would
AVENATTI.
.•
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months. M.B. would login into GBUS's bank accounts and see
wires to and from EA LLP or A&A. M.B. would reconcile the bank
more than the amount he withdrew, but that if you included the
was operating with a cash loss and some of the money AVENATTI
AVENATTI.
year.
his law firm. M.B. dealt with REGNIER a few times when M.B.
.;
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entire time that M.D. worked for GBUS. Payroll was on Mondays,
W-2s, among other things. These were the services provided for
account.
of 2015, when the wires to pay the payroll taxes were not
50
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of the payroll taxes by GBUS. M.D. did not know if the payroll
longer filing GBUS's payroll tax returns. M.D. told M.B. about
payments were not made because AVENATTI did not approve the
payments. M.B. told M.D. that AVENATTI did not approve the tax
payments.
"unethical" that payroll tax payments were not being made even
M.D. ultimately took a pay cut to leave GBUS for another job.
51
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M.D., however, said that the payroll tax payment requests would
have been sent to GBUS's accounting team. M.D. would send check
tax issues with M.B., because T.M. had already left GBUS at the
time.
for him in the human resources and payroll department, were the
only employees that knew GBUS was not paying its payroll taxes.
General Counsel. M.D. was not aware of GBUS ever hiring EA LLP
during his time at GBUS. M.D. had seen AVENATTI only four or
52
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AVENATTI and became concerned that AVENATTI would sue him for
following information:
B.H. met with T.M. and AVENATTI before accepting the position.
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between GBUS and Green Mountain. B.H. said that if there was a
because cash was always tight. B.H. heard rumors around the
office that GBUS was not paying payroll taxes. B.H. thought he
heard these rumors from T.M., M.B., and M.D. when he discussed
but stated that not paying taxes went into the "barrel of bad,"
and believed that AVENATTI would have been aware of such issues.
this. B.H. dealt with the paperwork for the GBUS stores at
2016 (see 9[ 39.d). The only name B.H. was aware of was GBUS.
at IMSA when GBUS already had enough problems. B.H. felt that
54
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GBUS was losing money on the IMSA sponsorship, and said that
coffee supply.
follow through on the future plans for GBUS. AVENATTI did not
reinvest into the company and the stores were failing. B.H.
"band aids" on it. The big reason B.H. decided to work for GBUS
AVENATTI.
bounced.
bought out TC Global. V.S. then became the Controller when M.B.
of GBUS. AVENATTI was the CEO, and T.M. was the CFO.
55
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and REGNIER handled the wire transfers. V.S. saw the wires on
the bank account records, but did not have wiring authority for
be paid weekly, but there was never enough money to pay all of
the bills.
56
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discussions with AVENATTI were about what bills to pay and what
was in the bank account. V.S. said he often could not tell how
much money was in the bank accounts because money moved in and
out frequently.
AVENATTI's response was that he was the CEO and owner, and that
V.S. said that the invoices were entered into the accounting
paid and which invoices were to have their payments held off.
AVENATTI would tell S.F. to cut a check for the invoice payments
invoices.
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had Ceridian stop paying the payroll tax withholdings. V.S. did
n. V.S. said that GBUS did not pay the payroll tax
that he would take care of it. V.S. said that AVENATTI knew
that the payroll tax withholdings were not being paid to the IRS
October 2016. V.S. said AVENATTI made the decision not to pay
the payroll tax withholdings and no one else at GBUS could have
Initially, the IRS notices and levies GBUS received were sent to
AVENATTI only, but later the IRS notices and levies were sent to
because the bank made notations of what money was levied on the
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books and records for GB Hospitality, and V.S. did not think GB
account.
late. M.G. told V.S. that AVENATTI justified the late payment
b y saying that the wire transfer had been lost, but V.S. did not
been lost.
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names for Global Baristas on contracts, but V.S. did not want to
its merchant IDs for its merchant accounts with TSYS. The
instructed V.S. to give him TSYS Rep. 1's contact number. V.S.
also said that AVENATTI knew the purpose of the change was to
avoid the IRS liens and levies. V.S. said that changing the
GB LLC. V.S. did not know the purpose of Doppio, did not
.1
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believe Doppio owned GBUS, and said that GBUS had never done any
He only heard from reports in the media that AVENATTI was the
AVENATTI was paid this salary as the CEO of GBUS. AVENATTI was
AVENATTI or his law firm. Some money went to EA LLP, but GBUS
was more outflow than inflow of cash from EA LLP into GBUS's
bank account.
LLP in March 2017. V.S. said that REGNIER sent the wire from
March 2018. After that, there was no work to be done. V.S. was
waiting to find out what the next plan of action would be for
61
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GBUS, but never heard from GBUS. M.E. emailed AVENATTI to ask
him to lay off the remaining GBUS employees after the last
accounting data from the cloud because 2nd Watch (the company
April 2016 after M.D. left GBUS. M.E. resigned from GBUS in
one point, AVENATTI said he was the Chairman and CEO. AVENATTI
AVENATTI made $250,000 per year as the CEO and Chairman of GBUS.
62
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but not the owner. When M.E. read that statement, she laughed
been a lawyer she would have still brought the issue to him in
his capacity as CEO. M.E. also believed that AVENATTI may have
and the employee guidebook for GBUS. M.E. was not aware of
payroll taxes to the IRS. M.E. said that AVENATTI did not pay
payroll withholdings because GBUS did not have the funds to pay
63
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federal payroll tax returns, but not filing them. M.E. said
that M.D. believed that payroll tax returns could not be filed
quarters had not been filed with the IRS. AVENATTI asked M.E.
to sign and file the IRS Forms 940 and IRS Forms 941 for 2015
and 2016. M.E. did not feel comfortable doing so and thought
returns because she did not think she was responsible for them.
M.E. sent AVENATTI the returns at the same time as she filed
them with the IRS. There were no payments made with the
2017 when she filed GBUS's IRS Forms 940 and IRS Forms 941s with
the IRS. M.E. said that REGNIER knew how to file the forms
everything that she had told RO 1. When M.E. told AVENATTI that
she had told RO 1 that AVENATTI instructed her not to file the
~i
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that he had sent her an email telling her not to file the tax
returns.
changed, but M.G. did not understand why the change had been
made.
the Tully's stores. M.E. would help M.G. count the cash that
had been collected. Store managers were told to hold all the
cash from the stores, and then the GBUS's district managers were
early 2018 when the Tully's stores were being closed down. M.G.
told M.E. that the directive to hold the cash deposits came from
AVENATTI. M.E. also said that the IRS liens were common
knowledge throughout GBUS when the stores were holding the cash
deposits.
the next step was. AVENATTI did not respond. M.E. did not
2018 or why GBUS was still operating after the stores closed.
M.E. wasn't doing much for GBUS during this time period other
This continued until September 2018, when her last paycheck from
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GBUS bounced. M.E. did not know how AVENATTI was paying for
AVENATTI.
hired to represent GBUS. M.G. said that she asked AVENATTI for
Counsel.
..
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until there was not enough money in GBUS's accounts to make the
payroll taxes. M.G. believes that B.H. told her that GBUS's
payroll taxes were not being paid. M.G. also saw an email from
taxes. M.G. believes that B.H. was copied on this email and
that she saw it because she had access to B.H.'s emails after he
forward. AVENATTI asked her how she learned about the lien,
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she needed them for proof down the road. As noted in paragraph
SUBJECT DEVICE 3.
told M.G. that the Tully's stores could no longer make deposits
cash deposit.
a text message with a picture of the deposit slip for the first
deposit into the GB Auto account. M.G. would give the physical
copy of the deposit slip to V.S. M.G. said that the last
AVENATTI that she was not going to make any more cash deposits
into the GB Auto account. After this, the Tully's stores began
1. M.G. said that she was aware of the IRS liens and
made the first cash deposit into GB Auto BofA Account 7412.
accounts for the Tully's stores. M.G. said that GBUS's merchant
AVENATTI could make that type of decision. V.S. told M.G. that
the change in the merchant IDs for the TSYS account was done
profitable stores.
AVENATTI about this change, he told her not to worry about it.
The Boeing contract was only time M.G. ever saw the name GB
Hospitality.
.•
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the two bills of sale for these transactions, in which the name
GB Hospitality had been replaced with GB LLC. M.G. did not know
who made that change. M.G. had received copies of the two bills
records back.z2
AVENATTI called M.G. and asked her if she went to the hearing to
which she had been summonsed, what documents she brought to the
hearing, and what was said in the hearing. When M.G. told
bank accounts, AVENATTI was livid. AVENATTI told her that she
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him. M.G. asked AVENATTI if he was not the owner of GBUS, then
responded that everything still went through him and that M.G.
AVENATTI told M.G., ~~I will fucking destroy him." AVENATTI also
all text messages between her and AVENATTI. IRS SA John Medunic
71
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invoices for GBUS went through S.F. S.F. had little involvement
Counsel for GBUS. S.F. also did not prepare any payments to
72
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payroll taxes.
AVENATTI thanked her for letting him know about the visit, and
paralegal and assistant. S.F. said the best way to get a hold
the cash deposits from the Tully's stores and deposit the cash
73
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this was done to avoid liens. Later, GBUS switched its merchant
changed and GBUS did not have an opportunity to move out of the
office.
server.
("POS") system. After GBUS took over Tully's stores, T.M. asked
B.C. to come back and help with other projects. B.C. worked
for month end sales and book them into the correct accounting
and reports from the POS system, then inputted this data into
for GBUS.
lawyer.
AVENATTI.
while GBUS was banking with CB&T. B.C. did not have direct
access to bank reports from CB&T, and would instead receive the
75
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Ceridian used to handle the payroll taxes for GBUS, but later
taxes. B.C. knew there were levies on all of the GBUS bank
B.C. what the levies were for, but did x~ot go into great detail.
V.S. told B.C. that GBUS owed the IRS millions of dollars, that
AVENATTI was aware of this, and that AVENATTI had decided not to
approved all account payable checks, and all GBUS checks had
AVENATTI's signature.
at TSYS.
B.C. explained that if the merchant IDs were changed, then the
to make this change. TSYS Rep. 1 told B.C. that AVENATTI had
76
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name and EIN, rather than GBUS's name and EIN. AVENATTI had
believed this change was made to alter the banking deposits and
avoid the IRS levies, which were occurring at the same time.
B.C. was not comfortable filing out the paperwork because the
change was clearly being made to avoid the levies. She believed
that she expressed this concern to V.S. and TSYS Rep. 1 over the
phone.
told her that TSYS was dropping GBUS as a client. TSYS Rep. 1
levies.
M.G. that the Tully's stores had been instructed to hold cash
for deposit, and then email the cash deposit amounts. B.C. was
on the email chain because she had to enter the cash deposits in
the general ledger. The cash deposits were made into a BofA
CB&T account.
77
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transfer the funds, and when to sweep the account. B.C. said
receivable.
daily basis. After M.B. left GBUS, A.H. reported to V.S. A.H.
V.S.
overheard in the office that GBUS was not paying its payroll
taxes. M.B. told her she was leaving GBUS because AVENATTI was
to get on a payment plan with the IRS, but AVENATTI would say
no. AVENATTI would say that he was negotiating with the IRS and
said that AVENATTI was well aware of what was owed to vendors,
pay vendors because AVENATTI had pulled money out of the GBUS
AVENATTI always made it clear that he was the boss and it was
79
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GBUS.
avoid IRS levies. A.G. also heard that GBUS owed a lot of taxes
from the Tully's stores and counted the cash at the corporate
office. M.G. eventually told AVENATTI that she did not want to
do that anymore.
AVENATTI first.
:t
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called Amazon Elastic Compute Cloud (Amazon EC2) that stored its
that 2nd Watch had turned off GBUS's server access to AWS and
data and emails from the AWS cloud-based server before 2nd Watch
82.)
accounts.
TSYS and the interview with TSYS Rep. 1, I have learned, among
merchant name on the agreement was GBUS, and the agreement was
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signed by M.B. The sponsoring bank under the TSYS agreement was
FNB Omaha.24
Agreement with TSYS and provided a blank check for GBUS's CB&T
GBUS CB&T Account 2240 began receiving deposits from TSYS via
levy for GBUS's merchant accounts with FNB Omaha. FNB Omaha
TSYS Rep. 1. This was the first time TSYS Rep. 1 had ever
day. During these calls, AVENATTI told TSYS Rep. 1 that TSYS
was holding GBUS's money, and that he did not know what was
going on. TSYS Rep. 1 told AVENATTI that there were no normal
with the company's name or EIN.25 AVENATTI told TSYS Rep. 1 that
TSYS had made a mistake and placed the accounts under the wrong
have been under GB LLC, not GBUS. AVENATTI told TSYS Rep. 1
to TSYS Rep. 1 that there was an IRS tax lien on GBUS, that the
IRS had issued levies on GBUS's bank accounts, or that GBUS had
to TSYS Rep. 1 that he had no idea why TSYS was holding its
funds.
confirm the `correct tax ID" and provide him with "the exact
TSYS Rep. 1 what he had been asked to do, TSYS Rep. 1 responded
as follows:
subsequent email that day, AVENATTI told TSYS Rep. 1 that ~~ [w]e
Rep. 1 explained to AVENATTI that TSYS does not ~~get any details
know what you find out and if there are any possible
Rep. 1, however, noted that he did not have any or all of the
information from FNB Omaha, and AVENATTI was telling TSYS that
and V.S. and asked them to send him the bank letters and the
:~
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my end." This was the second time TSYS Rep. 1 had asked
LLC CB&T Account 3730 was a new bank account that AVENATTI and
day. AVENATTI and V.S. were copied on all of the emails REGNIER
accounts because GBUS had huge tax liens and levies with the
IRS.
Rep. 1 said that when the GBUS merchant accounts were first
the IRS tax liens and levies would have been highly valuable
three Boeing employees, P.K., C.M, and A.R.G. P.K. and C.M.
Tully's Coffee)."
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payments for the first and second quarters of 2017. C.M. and
Boeing's emails and letters. C.M. said that she knew AVENATTI
was a lawyer, but was communicating with him because he was the
~~
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Boeing returned the Notice of Levy to the IRS and indicated that
it did not owe GBUS any money. As a result, the levy was
closed. A.R.G. was aware of the levy at the time and may have
been responsible for filling out and returning the levy form to
the IRS.
via FedEx.
lawyer for GBUS. A.R.G. always believed that AVENATTI was the
.
.
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A.R.G. said that it made sense for Boeing to buy the equipment
employees.
the entity name on the contract with Boeing. Under the terms of
E:~%7
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and one for the purchase of the kiosks. Both Bills of Sale
revised drafts of the two Bills of Sale in which the name of the
LLC." A.R.G. said that AVENATTI asked her to change the seller
.~
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A.R.G. and C.M. the executed copies of the two bills of sale.
letter, neither A.R.G. nor C.M. had ever seen any other
change of the entity name on the bill of sale may have violated
the tax lien or levies, but that Boeing checked and neither ~~GB
violation of the lien because the lien related to GBUS and the
entity. A.R.G. said that the only other entity name she had
seen on the contracts with Boeing prior to the two bills of sale
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GBUS's name had been on the two bills of sale or the 2016
contract.
2017.
92
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accounts to A&A and EA LLP during 2016 and 2017, while the IRS
30, 2016, a total of $200,000 was paid to the G.P. Family Trust
~~
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from GBUS CB&T Account 2240. These payments were for two months
bankruptcy petition was filed against GBUS. GBUS did not appear
"GBUS Trustee").
the bankruptcy court. To date, GBUS has not filed any such
documents.
things, the GBUS Trustee noted that because the GBUS Trustee now
95
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privilege.
the hearing the Bankruptcy Court held that the GBUS Trustee
GBUS and its lawyers, that the law firms were required to turn
over their files to the GBUS Trustee, and ordered the parties to
22, 2018.
.~
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that AVENATTI has caused his other companies, EA LLP and A&A, to
filing tax returns, EA LLP has not filed federal tax returns for
the 2013 through 2017 tax years, and A&A has not filed federal
~~
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LLP paid its federal tax deposits, including trust fund tax
period, EA LLP also filed its IRS Forms 941 each quarter and IRS
Forms 940 each year.29 On the various EA LLP IRS Forms 940 and
IRS Forms 941 filed with the IRS between 2011 and 2014 that I
Form 941 for the first quarter of 2015. The IRS Form 941
AVENATTI and told him that the field call was being made because
.;
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AVENATTI if REGNIER could attend the meeting because she was the
POA on file with IRS for EA LLP and was in the office at that
time, but AVENATTI said no. RO 2 told AVENATTI that EA LLP last
filed a payroll tax return for the first quarter of 2015, but
that it had not paid to the IRS the $194,545 in payroll taxes
that were due. RO 2 also told AVENATTI that EA LLP had not
filed its payroll tax return or paid its federal tax deposits
for the second quarter of 2015, and that the payroll tax return
and federal tax deposits for the third quarter of 2015 were due
would likely owe the IRS over $200,000 in payroll taxes for each
he was not aware that the federal tax deposits were not being
paid. When asked who prepared the payroll tax returns and made
was not sure what was going on with the taxes. RO 2 set a
file its missing IRS Forms 940 and provide certain financial
.
.
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advised her that she was the POA for EA LLP. RO 2 advised M.H.
of the deadline she had set for EA LLP to make the outstanding
payroll tax payments, file its IRS Forms 941, and produce
financial documents.
941 for the second and third quarters of 2015. Both IRS Forms
IRS Forms 941 for the second and third quarters of 2015, EA LLP
did not make the required outstanding payroll tax payments nor
requested.
substitute returns for the fourth quarter of 2015 and the first,
100
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$153,424.
EA LLP's IRS Forms 941 for the fourth quarter of 2015 through
the fourth quarter of 2016. The IRS Forms 941 appear to have
following information:
Florida.
for relief.
the filing of federal tax liens. The United States also filed a
101
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of the $1,288,277 in trust fund taxes due to the IRS, and 20% of
102
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and the United States. Among other things, the United States
103
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and that EA LLP and AVENATTI still owe the United States
LLP.
EA LLP.
104
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return stated that in the 2009 tax year Eagan O'Malley Avenatti
return (IRS Form 1065). The return stated that in the 2010 tax
105
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return stated that in the 2011 tax year EA LLP had gross
The return listed A&A as the designated TMP before the IRS, and
2012 partnership income federal tax return (IRS Form 1065). The
2014. The return listed M.H. as the paid preparer, and A&A as
tax return (IRS Form 1065) for the 2013, 2014, 2015, 2016, or
A&A:
business income of $1,578,558 for the 2009 tax year. The return
return preparer (the return does not state M.H.'s name, simply
106
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preparer.
for the 2011, 2012, 2013, 2014, 2015, 2016, or 2017 tax years.
The last federal income tax return that A&A filed was the return
and would likely have been required to file federal income tax
returns for the 2013 to 2017 tax years; (b) A&A generated
significant income between 2011 and 2017 and would likely have
been required to file income tax returns during the 2011 to 2017
tax years; and (c) EA LLP and AVENATTI had sufficient funds to
make the required payroll tax payments due to the IRS in 2015
107
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personal federal income tax returns for the 2011 through 2017
~ •,
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GBUS, EA LLP, and A&A, to hide and conceal his personal income.
individual income tax return for the 2009 tax year. The 2009
income from A&A in 2009, but only had $1,186 withheld in federal
for the 2009 tax year. AVENATTI, however, did not pay the
remaining tax due for the 2009 tax year until November 2015,
individual income tax return for the 2010 tax year. The 2010
2010 tax year. AVENATTI, however, did not pay the remaining
109
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taxes due to the IRS for the 2010 tax year until November 2015,
110
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M.H., contacted the IRS and advised it that AVENATTI would file
his personal federal income tax returns for the 2012, 2013, and
$1,042,878 for the 2009 and 2010 tax years. A copy of the
for the unpaid 2009 and 2010 taxes from the escrow company after
the 2016 or 2017 tax years. To date, AVENATTI has not filed
111
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for AVENATTI, GBUS, EA LLP, and A&A, I have learned, among other
and A&A's bank accounts.35 This amount excludes any amounts that
evasion:
112
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in cash was withdrawn from A&A CB&T Account 0661 via check or
ATM Withdrawal.
California.36
On Time.37
113
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114
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Lease.
apartment.
$5 million.
115
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demand letter the IRS sent to M.H. on October 30,. 2015. The
included on the notice of federal tax lien for the 2009 and 2010
116
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lien, but said that his standard practice in such situations was
to discuss the issue with his client or, if his client was not
KeyBank 6193.
sent AVENATTI and L.S. a letter via their real estate broker
the gross proceeds of the sale of the Laguna Beach property were
$12,625,000.
IRS Form 1099-5 to the IRS, J.M. said that Escrow Company 1's
standard practice was to file each IRS Form 1099-5 with the IRS
117
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however, J.M. confirmed that the IRS Form 1099-5 for the sale of
Residence:
Account 6193.
set forth in paragraphs 63.b and 63.c below, it appears that the
118
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Account 2851.
Account 0661.
Residence:
119
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Group.
Family Trust a total of $500,000 from A&A CB&T Account 0661 (see
120
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fact that AVENATTI failed to share with her his tax returns or
2015.
worth approximately $19 million and they were leasing the home
Beach residence."
month.
121
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clothing.
yearly cost for the investment in, and use of, Exclusive Resorts
122
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of $34,576,000.
2014 ranging from $34 million to $70 million, AVENATTI did not
file any personal income tax returns during these tax years.
123
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obtained three separate loans from The Peoples Bank during 2014:
14, 2014 to mature on June 15, 2014; and (3) a loan to EA LLP
2015.41 I have also reviewed IRS tax records and other bank
month loan from The Peoples Bank for GB LLC in the amount of
LLC. AVENATTI told C.S. -- the President and CEO of The Peoples
124
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they would need from AVENATTI before the bank could approve the
dated December 12, 2012, the stock certificates for GB LLC and
and copy of most recent filed tax return." The Peoples Bank had
Tax Return (Form 1040). The AVENATTI 2011 Form 1040 that was
$1,506,707 in taxes for the 2011 tax year. The 2011 Form 1040
however, I know that AVENATTI did not file any IRS Form 1040 for
the 2011 tax year nor did he pay any taxes to the IRS for the
125
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three-month loan from The Peoples Bank for EA LLP in the amount
capital."
the loan from The Peoples Bank first upon disbursement of the
Sheets and Profit and Loss Statements for EA LLP through March
10, 2014, which stated, among other information, that the firm
126
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1065 ("Peoples Bank 2012 Form 1065"). The Peoples Bank 2012
2012 Form 1065 also attached a Schedule K-1, which showed the
Form 1065, that EA LLP actually filed with the IRS ("IRS 2012
signed the IRS 2012 Form 1065 under penalty of perjury as the
member manager. The IRS 2012 Form 1065 was prepared by M.H.
(the CPA in Los Angeles, California, who served as the POA for
GBUS). The IRS 2012 Form 1065 listed gross receipts and total
127
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income on the Peoples Bank 2012 Form 1065 and the business loss
on the IRS 2012 Form 1065) than was reported on the actual Form
from the January 2014 $850,000 loan (plus interest), and to wire
AVENATTI sought a $2.5 million line of credit from the bank for
EA LLP to provide working capital for the needs of the law firm.
128
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contingency cases, and the net costs and attorneys' fees due to
balance sheet; personal income tax returns for 2012 and 2013;
its subsidiaries.
that he would get the bank the other requested documents later.
129
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listed over $75 million in total personal assets and a net worth
Profit and Loss Statement, and a Balance Sheet for January 2014
$18.2 million. The EA LLP Balance Sheet for the same time
period claimed total current assets of over $31 million and net
130
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The Peoples Bank with what were purported to be his 2012 and
adjusted gross income were $5,423,099; the total tax due was
AVENATTI did not file a 2012 Form 1040, and did not make any tax
42 The Peoples Bank deemed the 2013 IRS Form 1040 they
received from AVENATTI via email on December 1, 2014, as a draft
because they received a slightly different and updated 2013 IRS
Form 1040 soon thereafter. The Peoples Bank also received 2011
and 2012 IRS Forms 1040 for AVENATTI. However, neither the 2011
Form 1040, 2012 Form 1040, nor the updated 2013 Form 1040 were
attached to an email, so the bank is not certain if they
received the documents via United States Postal Service or
another method.
43 AVENATTI married L.S. in 2011, however, the 2012 Form
131
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M.H. The "draft" 2013 Form 1040 stated AVENATTI owed $1,305,482
in taxes for calendar year 2013, and based on his tax payments
tax. The subsequent 2013 Form 1040 provided to The Peoples Bank
2013, and that based on his tax payments during the year, he
AVENATTI did not file a 2013 Form 1040, did not make any
pocket costs for class counsel [EA] LLP." M.C., who was the
132
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$350,000 was wired to a bank account for a lawyer who worked for
Peoples Bank that the Meridian case settled and AVENATTI would
send AVENATTI's money. C.S. told M.C. that EA LLP was obligated
to pay off the loan, and said the bank could give AVENATTI the
neither EA LLP nor AVENATTI had paid off the $500,000 loan to
AVENATTI what his status or plan for the loan was. The bank's
133
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AVENATTI thanking him for the quick response to the prior email
AVENATTI that he would need to pay off his current loan before
12, 2015, and wanted to make sure the loan was paid off by the
to get an update on the past-due loan and find out when AVENATTI
AVENATTI said that a wire to pay off the loan would be coming by
a certain date, but the money was never transferred to the bank.
20, 2016, if the loan was not paid off by then, which would
134
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arbitration in Colorado.
subsequent years.
Draft," which still had the same payment amounts and dates.
agreement.
January 10, 2018 through 2021. The primary change AVENATTI made
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provided to G.B., however, listed the payment dates for the $1.9
Prior to the $1.6 million wire transfer, CNB Trust Account 5566
were deposited into CNB Trust Account 5566 were ever paid to
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Trust Account 5566 for his own personal purposes, including the
following payments:
and
case.
first settlement payment was due on March 10, 2018; did not know
that Company 1 had made the $1.6 million settlement payment; and
did not know that AVENATTI had received the settlement payment
in January 2018.
the date that G.B. believed the settlement proceeds from Company
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money G.B. was owed. It appears that AVENATTI did not respond
the wire."
message saying, among other things, "any word on that wire from
[Company 1]?"
in. The next day, March 15, 2018, AVENATTI replied, ~~Let's chat
concerned G.B. was and expressing his need for the settlement
money. On March 23, 2018, AVENATTI texted G.B. back and told
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him ~~don't worry. Let's chat tmrw. We will figure this out.
Michael."
heard from Company 1 about when the money was going to be sent,
and what actions G.B. and AVENATTI could take to cause Company 1
money had already come in. AVENATTI, however, agreed via text
actions they could take going forward to get G.B. his money.
settlement.
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G.B. had been led to believe, and that Company 1 had in fact
letter to AVENATTI via email, which stated that G.B. had been
led to believe that Company 1 had not made the initial $1.6
true and correct copy of the Settlement Agreement and any fee
the funds.
AVENATTI sent two text messages to G.B. stating ~~Pls call me"
and ~~What is this all about? Pls call me ASAP."46 AVENATTI also
just tried you on your cell. Please call me when you receive
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disclosed the $1.6 million settlement payment from the G.B. case
from CNB Trust Account 5566, which came from the settlement
understand that any payment AVENATTI received from the G.B. case
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hard copy GBUS emails responsive to the subpoena. The hard copy
entities. On October 21, 2018, SA James Kim and I met with S.F.
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mail and invoices. S.F. also consented to have IRS agents copy
copies of her GBUS emails and other GBUS records. The hard copy
GB LLC, and other entities. On October 22, 2018, M.G. met with
to have IRS-CI copy and secure evidence from her external hard
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download and secure the evidence. The hard copy documents were
LLC, and other related entities. On November 13, 2018, A.G. met
hard drive and Veeam 2GB flash drive. A.G. consented to have
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IRS-CI copy and secure the evidence from these devices. An IRS
the hard drive (SUBJECT DEVICE 5) and the flash drive (SUBJECT
DEVICE 6), and then returned the devices to A.G. the next day.
downloaded from the AWS cloud server before AWS and 2nd Watch
downloaded from the AWS cloud server before GBUS's services were
A.G.; B.H.; M.D.; M.E.; M.G.; S.F.; T.M.; and V.S. Notably,
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147
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184 Page 4D #:404
capacity, and did little to no legal work for GBUS. Indeed, all
Exhibit 1.
~ ~:
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between AVENATTI and lawyers from the five identified law firms
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or any other law firms, the search team will immediately cease
Court.
security devices.
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151
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with little or no cost. Even when such files have been deleted,
amount of hard drive space devoted to these files, and the files
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what it has been used for, who has used it, and who has been
digital data that is neatly segregable from the hard drive image
associated with any file can provide evidence of a file that was
once on the hard drive but has since been deleted or edited, or
paging systems can leave digital data on the hard drive that
the times the computer was in use. Computer file systems can
record data about the dates files were created and the sequence
153
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substantial time.
been used, what it has been used for, and who has used it, may
was
example, to rebut a claim that the owner of a digital device
time.
For example, files with the extension ".jpg" often are image
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currently be decrypted.
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confederates.
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government's investigation.
GBUS was evicted from its corporate offices and AVENATTI refused
has been able to obtain some GBUS records, including the data
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evidence.
V222. CONCLUSION
/s/
Remoun Karlous, Special Agent
Internal Revenue Service -
Criminal Investigation
DOUGLAS F. McCORMICK
HONORABLE DOUGLAS F. McCORMICK
UNITED STATES MAGISTRATE JUDGE
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E~HI}3IT Z
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I,Nancy L. James, in my capacity as the Trustee far Global Baristas US LLC, hereby
agree and state as follows.
1. On or about 4o#ober 24, ~U18, s Chapter 7 ~tvoluntary bankruptcy petition was
filed against Global Baristas US, LLC ("G$US"), in the United States Bank~vptcy Court for the
Western District of Washiington, in In re: Global Baristas US LLC, No. 18-14095~TVfiD (the
"GBUS Bankruptcy"). fln Navem6er 30, 2018, an Qrder for Relief was issued in connection
with GBUS Bankruptcy, andIwas apgoint,~cl as ~Ct~e Tres#ee fer GBUS.
2. Iunderstand that the Internal Revenue Services — Crimina] tnvestigation~ {"IRS-
~P'~ is in g~ssessan o~ certain GBUS business recc3rds and communieatic~ns it obtained from
ft~rmer GBUS employees in both hard-copy and electronic form, as described xn paragraph 3,
below.
3. In my capacity as Tru~ttee for GBUS,Iconsent to the seaz~~ of the ~a~lawing
items Curren#y in the possession of IRS-CI.
a, A, ~o~rensic image of a Dell XPS I28 GB Samsung SSD, bearing serial
number SiD2NSAG5(}00'7?7, provided to TRS-CI by ~ia~~an or about Oc#ober 22,
2D18.
b. Hard-cagy GBUS records provided by Ni-E~on or about October
22, 2018.
c, A forensic image of a Dell Frecision,, Nfodel M4800, bearing service tag
number ~52~+1262, provided to SRC-CI by S~F~~n car about Qctaber 21, 2018.
d. Hard-copy GSUS records grov died by S~F~nn ar abau~
O~ctot~er 21, 2418.
1
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2
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filed in the GBUS Bai~icruptcy on October 24,?018. Nor does it apply #o any communications
between the Trustee of GBUS and any lawyers acting oii behalf pf tl~e Trustee, including, but not
limited to, Rory C. Livesey and the Livesey Law Firm. This waiver ofthe attorney-client
privilege is further limited to the United States government and its employees and agenfis,for any
purpose related to the official performance oftheir duties, and does not extend to any other
officer, directors, employees, or agents of GBUS to disclose to the United States governmeizt all
the limited attorney-client privilege waiver set forth in paragraphs S and 6 above.
7. I have read this Limited Waiver ofthe Attorney-Client Privilege and Consent to
agreed to this Linuted Waiver ofthe Attorney-Client Privilege and Consent to Search freely and.
voluntarily.
2 - J ~/-~
L. J Date
Trustee for Global Baristas US LLC